Labour plan to expand automatic pension saving to one and a half million workers earning less than £10k

Workers earning less than £10,000 could be automatically enrolled onto workplace pension schemes under a proposal being considered by the Labour Party.

Shadow secretary of state for work and pensions Rachel Reeves is announcing this morning that her party may change automatic enrolment to allow the entry of 1.5 million people currently frozen out by the programme, a million of whom are women.

Currently, anyone earning less than £10,000 do not qualify for automatic enrolment, and instead must volunteer if they want to join their workplace pension scheme.

Proposal: Rachel Reeves MP says that women in particular would benefit from the changes being considered by Labour.

Ms Reeves said that this threshold could be reduced to £5,772 - the lower earnings limit for National Insurance - in a move that would cost the Government £20million.

The move would give the country's lowest paid and part-time workers access to workplace pensions, which Ms Reeves says will give them much needed security in retirement.

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She said: 'The Pensions Commission established by the last Labour government set out a plan to help people save into a workplace pension.

'But the Government left out 1.5 million people from workplace pensions, including more than a million women in poorly paid work when they increased the level of earnings to qualify for auto-enrolment.

'Retirement should be something to look forward to, but for far too many people the insecurity they face during their working life is set to continue when they retire.

'With the rise in zero-hours contracts, part time and low paid jobs and insecure work, an increasing number of people risk missing out on the chance to save for their retirement.

'The government’s failure to encourage more people to save threatens to store up huge costs for taxpayers in the future with a rising benefits bill.'

He said: 'This is yet another unfunded promise that would mean more spending, more borrowing and more taxes. It would hit businesses with higher costs and more red tape, and ultimately would put jobs at risk. It's the same old Labour.'

Previously, pensions minister Steve Webb has said there is less need for these people to be auto-enrolled as they will not need as much private pension savings in retirement as the state pension should be enough to cover most of their financial needs.

'Most low earners need every pound of income to go into their pocket, not to be taken from them and put into a pension they can’t access before the age of 55. In most cases, the flat-rate basic state pension will give them an adequate retirement income relative to their earnings when in employment.'

The Institute of Economic Affairs (IEA) also said the move would cost employers more as well.

Prof Philip Booth, of the IEA, said: 'The proposals will also load yet more costs onto employers – both administrative costs and costs of the employer matching contribution. Politicians should be making it easier, not more difficult, for employers to take on more staff.'